Are Businesses Ready For Post-Brexit Trade Deals With China?

Posted on Jan 8 2019 - 10:54am by Editorial Staff

Not a day goes by when the news headlines don’t feature the impending exit of the UK from the EU. But despite news outlets alerting us to each Brexit update as and when they happen, we don’t seem any more prepared for the 29th March 2019 than we were a few years ago. In fact, research has shown less than a third of UK businesses has a no-deal contingency plan in place.

Though a no-deal Brexit is the worst-case scenario, there would be a few benefits to such an exit, including the freedom to make trade deals with the rest of the world. It would not affect trade with countries outside the European Union, which is precisely what the UK seems to be planning for with its Prime Minister having recently visited China for talks. But is China as interested in a UK trade deal as the UK is? After all, in 2016, the UK imported £42.3bn worth of goods from China, but exported only £16.8bn to China in return. But then again, that’s not entirely proof that China wouldn’t increase its British exports demand if a trade deal was in place — the country is already hoping to widen its trade with The Belt and Road Initiative.

The initiative would allow China and Asia as a whole to forge new trade routes that would connect it to the wider world. The “belt” side of it roughly equates to the land connections it will build through railroads, and the “road” refers to a sea-route of trade. Essentially, China is building a new Silk Road,  and 71 countries are already part of the project, including Russia and New Zealand.

There isn’t a resounding vote of confidence in the initiative from the UK government, says Business Insider UK. Where Prime Minster Theresa May has not pledged support to the project that she feels isn’t a guaranteed success, Chancellor Phillip Hammond expressed his support of it. This could, of course, change as the UK’s relationship with China evolves. In fact, we have already enjoyed success in China before Brexit has even resolved. At the start of 2018, during talks between the UK and China, the 20-year ban on British beef was lifted. The deal is purported to be worth £9bn to the UK.

Due to a fear of “mad cow disease”, the EU banned the worldwide exports of British beef in 1996. It wasn’t until 2006 that the EU lifted the ban, but other countries chose to retain their ban on the product, including China.

What does China want to import from us? What markets and UK businesses could, potentially, fare well with Chinese consumers? According the Telegraph, top British exports the Chinese enjoy are:

  • Burberry, and other designer labels
  • Scotch whisky
  • British cars
  • Scottish salmon

The Chinese market isn’t reserved for just big name brands either. The Creative Industries reported on the success of hairbrush and haircare brand Tangle Teezer over in China. Tangle Teezer’s International Managing Director, Gemma Clarke, confirmed in the article that China became its second biggest sales market in only 3 years trading there. The success is attributed to a Tangle Teezer product being bought by a Chinese model, whose social media influence saw the brand being highlighted to her many followers. China loves its online shopping, so influencers should not be overlooked when planning to cater to the Chinese market.

Businesses stand to do very well in the Chinese market with the right approach and the right product. At the very least, firms need to plan for the eventual shake-up to the UK’s ties with the European market once Brexit comes into play, and time is running out to start building the foundations. This small window of golden opportunity has been highlighted by Rebecca De Cicco in regards to the UK’s construction industry in particular. The director of Digital Node outlined how 70% of buildings over 200 metres tall completed in 2017 were built in China, and so the country is increasingly interested in building information management software and crowd simulation. The use of British construction software has already proved its value to the Chinese construction sector in Beijing’s new airport, the Beijing Daxing International. Projected to see 45 million passengers a year, the airport’s construction has benefited from crowd simulation software provided by UK structure design software experts, Oasys. The software alerted the construction company and designers to any potential bottlenecks, congestion problems, or other inefficiencies.  

Knowing how to approach the market can make all the difference, advises the Business Magazine. As with any overseas market, the magazine advises companies to consider the culture of the country they are trading with; in this case, explore China’s culture. The general consensus is to be aware that what works in the UK may not work in China’s business ground, and as relationships can take a long time to build, jeopardising them with an ill-placed comment or miscommunication can slow that pace even further. Brexit will soon be upon us and businesses need to be ready. Whether or not we retain trade deals with the EU, and to what to degree, the wider world is coming to the UK. Will it be a great opportunity for businesses, as some predict?

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Editorial Staff at I2Mag is a team of subject experts.